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Darden School of Business Tesla Strategic Analysis

1.
B.3 TESLA
1

2.
Tesla Motors designs and sells high performance, super efficient electric cars. Tesla Motors cars join style,
acceleration, and handling with advanced technologies that make them the quickest and the most energy-efficient
cars on the planet. (Tesla Motors, Mission)

3.
Tesla Motors has brought the best of the
automotive and technology worlds together
to permanently bury the image of an
electric car as a step backwards in
performance, efficiency, or design
Tesla Motor’s key technology is the 100%
electric powertrain
They set out to forever alter perceptions of
electric vehicles and to make electric cars a
viable alternative by producing a car that is
at once beautiful and exciting to drive,
along with being the most efficient
production automobile on the planet
(Tesla Motors, Vision)

4.
Strategic Analysis
2003
• Founded
2006 2007 2008 2009
• Prototypes of the
Roadster introduced
to the public
• Two batches of 100
Roadsters sell
• Opened first retail
store in Los Angeles,
second in Menlo
Park
• Unveiled the
Model S
Milestones
2010
• Strategic
Partnership
announced
with Toyota
• Initial Public
Offering
Opened
2011 2012 2013 2014
• Stopped taking
Roadster orders
• Unveiled Model X
• Commercial deliveries
of the Model S begin
• Began building
Supercharger stations
• Time Magazine’s Best
25 Inventions of 2012
• Musk promises US to
be covered with
Supercharger stations
• First partial recall
• Model X will
enter production
• 80% of US
population
covered by
Supercharger
stations
Tesla

7.
Strategic Analysis
Industry Analysis
Market
US auto industry is full of auto manufacturing companies, BMW Group, Chrysler/Dodge/Jeep, Ford Motors, General Motors,
Honda/Acura, Hyundai/Kia, Mazda, Nissan, Subaru are the main competitors in US Auto market
For 2012 as a whole, automakers sold approximately 14.5 million vehicles in the U.S. market, a 13 percent increase from 2011 and
the highest annual sales total since 2007 marking the third consecutive year of annual sales increases of at least 10 percent
Auto Manufacturer Market Share in America (Feb 2013) Luxury Auto Market Share in America (Jan 2013)

8.
Strategic Analysis
Industry Analysis
As fuel prices remain high and there is greater concern for the environment, more energy efficient cars are increasing in demand
Moreover, as part of their bailout specifications, the Big Three automakers are required to quickly release more energy efficient
vehicles to the market. This increasing popularity for hybrid and electric cars are going to affect the industry in big ways as it will
create a new market for businesses to cater to these new forms of vehicles.
Market
Auto Manufacturer sales in 2012

12.
Strategic Analysis
Tesla´s long-term strategic goal is to create affordable mass market electric vehicles (EV)
In order to achieve that goal it will increase the number and variety of EVs available to mainstream consumers in 3 ways:
• Selling it´s own vehicles in a growing number of company-owned showrooms and online. First vehicles have been the
Roadster, the Model S, and it´s expected to start selling the Model X next year
• Selling patented electric powertrain components to other auto manufacturers so that they may get their own Evs to
customers sooner. As a result it has partnered with Toyota and Mercedes in order to supply batteries and charging systems
• Serving as a catalyst and positive example to others automakers, demonstrating that there is pent-up consumer demand
for vehicles that are both high-performance and efficient.
Strategic goals
Expansion Partner with traditional auto makers Look for new Applications of tech
• Achieve 20K Model S
Production Goal
• Partnership with Toyota and Mercedes
• Expand to all automakers
• Standardize Ev Parts for efficient
manufacturing
• Battery technology and electric
motors have broad application
potential
Strategic goals & Competitive advantage

14.
Strategic Analysis
As a result of those strategic goals we can see a clear differentiation in the incomes of the two paths:
• Vehicles sales & development services
Strategic goals & Competitive advantage

15.
Strategic Analysis
Competitive Advantage
Tesla´s central competitive advantage is the low cost of Tesla’s battery pack, which allow to sell the Model S at a reasonable price
but with a near-normal (up to) 300 mile range, a combination other EVs have yet to deliver
Tesla Model S battery pack costs will be at/below ~$300/kWh, well below from other OEMs/battery makers ($500-600/kWh for
2011-2012 timeframe, and $375-500/kWh mid-decade target)
A key source of Tesla’s cost advantage is its ability to apply commoditized small cylindrical lithium cells (used in consumer electronics)
to a car via proprietary thermal/power management
Strategic goals & Competitive advantage
Tesla Leads on Range (maximum miles per single charge) Tesla Leads on Cost (battery pack cost in $/kWh)

21.
Competitors Analysis
By Company
General Motors Toyota
Competitor Response Profile:
• GM represents a significant future threat to Tesla, if, as
planned, Tesla decides to enter the small premium market
near the $30,000 price point
• The current development of the Volt, although it is not a
true electric car, indicates that GM remains interested in
the electric/hybrid car market, and will continue to pursue
the market in the foreseeable future
• Designed for approximately 40 miles of battery powered
driving before the 1.0L turbocharged gas engine
automatically begins to recharge the battery, thus
extending the range of the Volt to up to 640 miles of
highway driving
Actions:
• The only way for Tesla to compete effectively would be
through differentiation, which would focus mainly on
technology
Competitor Response Profile:
• Toyota Motor Company’s has a longstanding hybrid
technology and possible entry into the plug-in hybrid and
fully electric car market
• Toyota’s Prius first took the road in Japan in 1997, arrived
in America in 2000, making it the most prevalent hybrid
car
• Tesla should be wary of Toyota offering a larger battery
pack and a home charging station as options for the Prius,
as this could eventually lead to Toyota offering a full
electric version of the Prius.
• This would cut into Tesla’s plans to offer fully electric
sedans at different price points
Actions:
• Tesla should focus on improving their technological
advantage in fully electric cars so that by the time Toyota
enters the electric car market, Tesla has a technological
advantage.

22.
Competitors Analysis
By Company
Competitor Response Profile:
• Tesla’s one of the potential competitor is BMW, which
continues to put effort into entering the luxury, high-
performance, low-emissions, low-consumption auto
market
• In August it unveiled the production version of the i3
• The company’s first all-electric series production vehicle
will be available next year some time before June and at a
seriously competitive price.
• Moreover, the i3 is not merely but the first of a line of EVs
planned to deliver “individual mobility” – that’s what the
“i” brand stands for
• BMW has designed and built its own electric motors for its
models
Actions:
Competitor Response Profile:
• The Mercedes-Benz B-Class Electric Drive will go on sale in
the US and Europe from early next year
• Most of the systems that charge and run the little B-Class
will be shared with the upcoming SLS AMG Coupe E-Cell.
• Mercedes-Benz product R&D manager Dr Thomas Weber
says electric vehicle technology will move quickly enough
to make dedicated electric vehicles viable even for those
who want to travel longer distances and not pay a
premium over a traditional petrol or diesel car.
• Mercedes-Benz has partnered with Tesla for its electric
motor and battery technology
BMW Daimler AG
• Tesla should improve brand awareness and Global expansion before the most serious threats vehicles from European
companies enter the game

26.
Five Forces Analysis
Substitutes
Suppliers
Industry Competitors
Buyers
Potential Entrants
Threat: Low
• Small number of competing vehicles,
different niches.
• Some are collaborating with Tesla Motors
• European companies developing their own
technology
Competition: Moderate
• High entry barrier
• Majors brands are competing
• Tesla sector is niche and yet to be
discovered
• No other EV in that sector
Battery Companies
• Bargaining Power: Low since Tesla buys Li-
ion cells from different manufactures
Engine: In house
Chasis/Engineering:
• In house. There was a exclusive
partnership with Lotus for the Roadster.
Bargaining Power: High
Transmission: In house
Threat: high
• High entry barrier: Large number of
substitutes available
• Hybrids and Plug-in Hybrids
• Low displacement turbo diesels with low
emissions and good fuel economy
B2C
• Bargaining Power: Low
• Demand very high
B2B
• Bargaining Power: Low
• No other comparable technology
available

29.
Environmental analysis
Political & Legal
• US $8 billion program for advanced
vehicle technologies supports engineering
and production of the Model S, and the
development of powertrain technology
• Department of Energy granted $465
million loan to Tesla in 2009
• Several laws in different US States does
not allow Tesla to sell directly to the
consumers
• To facilitate growth, the U.S. government
has invested $5 billion through the
American Recovery and Reinvestment Act
and the DOE‘s Advanced Technology
Vehicle Manufacturing (ATVM) Loan
Program.
• The DOE aims to increase the public
accelerated charging stations from 500 to
20,500 in 2012 and reduce battery pack
costs by 70% by December 2015.
Technological developments
• Maximum range for Tesla cars is 300
miles
• There is a need for charging station
infrastructure required on long highways
Environmental & Social
• Tesla´s awareness to climatic changes and
low carbon footprint in production
• Promotion of new technologies and
changes in energy policies by government
• Increase in environmental consciousness
of consumers (green / eco ) products
• Declining preference for petroleum fuel
• Tesla vehicles produce zero emission
Economic
• Economic conditions in 2014 also should
mirror those in 2013, including moderate
but steady economic growth and job
creation, low interest rates and readily
available credit, low inflation, a strong
stock market, and improved housing
prices.
• These conditions and, in particular, their
persistence over a number of months
inspire consumer confidence and
motivate consumers to buy new cars
• The auto industry will enjoy another year
of growth in 2014 with new car sales
topping 16 million for the first time since
2007
• The release of pent-up demand from
buyers who deferred sales during the
recession will continue as the increasingly
aged fleet drives more consumers back to
the new car market
• Sales will also benefit from an expected
300,000 additional lease returners
compared to 2013, who will lease or buy a
new vehicle when their current leases
terminate
Demographic Trends
• Because Tesla’s main product is a sports
car, their target market consist mainly of
the male sex.
• Due to their currently high price point
these males must be businessmen who
have yearly disposable incomes of
possibly $100,000 and higher.
• This target market live stylish lives, are car
enthusiast, and follow trends, such as
going green.

33.
Recommendations
Performance Vehicles
Premium Vehicles
Small Premium Vehicles
Family Vehicles
Subcompact / City Vehicles
Cars Technology Transfer EV Infrastructure
Tesla should focus only in
the Premium sector in
order to achieve it´s first
strategy goal
Expanding to the other
sectors will dilute its brand
recognition affecting it´s
premium segment sales
and lowering it´s margins
It will also require to
expand it´s current
infrastructure to support
mass EV production and
management
In order to achieve it´s
second strategy goal
towards the creation of
affordable mass market
electric vehicles Tesla
should not only license it´s
technology to high
premium manufacturers
like Mercedes but to less
premium ones so Tesla
technology becomes a
standard and most
companies dependent for
their EV vehicles on Tesla´s
improvements
In line with the previous
strategy goal Tesla should
set the industry standard
for EV infrastructure, by
creating an unique
charging system and
allowing other auto
manufactures whose
vehicles are based on
Tesla´s technology to
access Tesla´s EV
infrastructure
This should be done
gradually at it can become
a risk by saturating Tesla´s
own capacity for it´s
vehicles
Market

34.
Recommendations
Tesla should seek to gain a more global presence and grow their business through international expansion before most established
european firms are able to get their premium EV cars to the market
In order to do that it should:
- Increase it´s own brand awareness (Most Europeans don´t even know that Tesla Motors exist)
- Target countries with EV infrastructure currently developed
International Expansion

35.
Recommendations
Tesla‘s battery pack technology is critical to the company‘s positioning and competitive differentiation.
The low cost of the battery pack allows Tesla to not only design cars with battery ranges greater than the competition but also place
equal emphasis on design, performance, and energy efficiency.
Electric battery manufacturers rarely release exact battery pack costs, but most estimates range from $500 - $1200/kWh ($33,000 for
100-mile range) depending on chemistry and cell-form factor.
However battery pack costs have decreased faster than expected. In November 2009, Deutsche Bank analysts projected average
battery pack costs reducing from $675/kWh to $500/kWh by 2015 and $325/kWh by 2020; but in March 2010 it cited industry
reports of battery pack bids in the mid-$400/kWh for 2011/2012.2
Further evidence is Nissan reporting the battery pack in its economy EV Leaf costs only $375/kWh.
In addition, Tesla CEO Elon Musk stated that the Model S battery pack cost less than the Leaf’s pack, a statement corroborated by
calculations of battery pack costs given information in Tesla’s IPO.
If battery pack costs reduce as the DOE projects, consumers will have further incentive to own EVs and PHEVs since costs are $0.02 -
$0.04/mile to operate whereas a 25-MPH gasoline vehicle costs $0.12 - $0.15/mile to operate. In addition, maintenance costs will
likely be lower for EVs and PHEVs.
Keeping this crucial advantage is essential for Tesla in order to maintain it´s competitive advantage in the EV market.
Innovation and R&D

36.
Recommendations
Because of the high cost of the Roadster, Tesla‘s target market was rather small. Owners were often referred to as eco-
hipsters,‖affluent environmentalists or rich early adopters
• With the goal of selling 20,000 Model S vehicles per year initially, Tesla must target a larger segment of consumers who are both
interested in functionality and performance and are also environmentally and politically conscious
According to the IPO, Tesla believes that the combination of functionality, performance, style, energy efficiency and overall cost of
ownership of the planned Model S will draw buyers from several market segments, including the lower, medium and upper premium
sedan classes
• The ideal target market for the Model S will include consumers who see EVs as symbolizing their commitment to the environment
and will embrace the role as a member of a brand community by becoming a Tesla Enthusiast
Tesla is still a young emerging company, but it has created strategic partnerships that have ensured its survival thus far, brought in top
leaders from the automotive and technology industries to run its operations, and given itself a competitive advantage through its
superior battery technology and product design.
If it can see its way through the success of the Model S as it´s currently seeing, meet projected sales, and increase its operating
margin, Tesla will be well on its way to its mission of increasing the number and variety of electric cars available to mainstream
consumers by creating cars that are fun to drive and environmentally responsible
Customer Target